Insurance agents to be barred from selling ponzi plans

In the wake of the Saradha scam, the Insurance Regulatory Development Authority (IRDA) has decided to come out with stricter guidelines for insurance agents in order to prevent them from marketing ponzi schemes.

As part of the new guidelines, both individual as well corporate agents would have to submit written undertakings of having no association with private entities involved in the business of accepting public deposits.

This stricture would be applicable to both public and private insurance companies as well as general and life insurance firms.

According to IRDA sources, the authority will shortly ask insurance companies under its authority to collect the written undertakings from their regular and corporate agents.

After the Saradha bubble burst, it became apparent that several insurance agents, most of who were associated with the country’s biggest insurance firm Life Insurance Corporation of India, were doubling up as collection agents of different chit fund companies, including that of the tainted Saradha Group.

It was also evident that such incidences were rampant mainly in West Bengal, Assam, Bihar, Jharkhand and Orissa, where the activities of such ponzi schemes were the highest.

Last year, IRDA had cancelled Rose Valley Chain Marketing System Ltd’s licence as corporate agent licence of Life Insurance Corporation of India for violating terms and conditions of the licence and also for not abiding by specific provisions of the Insurance Act, 1938.

In fact, both the Securities and Exchange Board of India (Sebi) and the Serious Fraud Investigation Office (SFIO), the investigation arms of the Union ministry of corporate affairs, are conducting probe against different companies under the Rose Valley Group for their alleged involvement in ponzi activities.